What Is Accounting?
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Accounting is a tool, invented by humankind to fulfil the needs of the society. Besides, accounting cannot in any true sense be said to have been discovered, but must have been constructed by human minds to serve the human needs. However, the most important purpose of accounting is to communicate relevant information between and among producers and users. Before we prepare an account, we must know some basic knowledge about the accounting so we can make better decision. Therefore, from the case study above, we can point out the mistake that done by Marci and Tyra. And, to solve the problem, as an accountant, Tyra must know very well about the financial accounting and Marci must do his part as a manager of the company to check for the account that Tyra done before he makes any decision.
From the study, we can conclude that Marci does not make an appropriate arrangement on the job specification. For example, Tyra Banks does most of the clerical work, accounting and appointment scheduling for the business. In fact, there should be one to handle the accounting. So that, he can be more concentrated on the financial issue of the company such as the expenditure of the firm is too much in what field like electricity and so on.
Marci has less emphasize on the financial issue. Marci reviews the statements briefly and then files them away for future reference. In actual practice, Marci rarely looks at the financial statements again. This is a major mistake as the financial statement is critical for analyze whether the way you deal with your business is efficient or not with not only referring to the profit that should be gained but also the detail like loan to other has cause a lot of bad loan and so on. Hence, Marci should know some of the basic functions of the financial accounting. For example, financial accounting is the process of designing and operating an information system for collecting, measuring and recording business transactions, and summarizing and communicating the results of these transactions to users to facilitate the making of financial decisions. Consequently, financial accounting is used to record and control the business transactions, to maintain the accuracy in recording, to facilitate the efficient allocation of resources and others. By this, Marci will more concentrate when go through the financial statement and able to correct the mistakes which are done by Tyra. It is also a easier way for the company to know the profit or loss at the end of the financial year.
The income statement should be prepare every month and as a major reference as Marci done any decision and also plan for the improvement or marketing strategy in the near future. For example, if the resource that firm owned is not fully utilised like workers efficiency. The firm can find way to improve the workers productivity by training, spiritual encouragement, promotion and others.
Marci should realise the Accounting concept – business is not equal to the owner although in the Legal entity- business is equal to the owner. So, she should not withdraw cash for her personal living expenses. Besides, withdrawal by the owner in the form of cash, goods and assets for the personal use are classified as drawings, which will reduce the amount of owners equity.
In addition, Tyra has not received much more training on how to prepare the financial statement. Hence, at the end of each month, she only spent some times on